The Pay-For-Placement Search Engine
Starting in 2001 with Overture (formerly known as GoTo), a new type of search engine emerged where advertisers could “bid” for a specific ranking or position on keywords or phrases in a search engine. Contrary to algorithmic-based search engines which use complex formulas to evaluate an actual web page and determine its relevancy to a specific keyword or phrase, an advertiser could simply “buy” its way to the top of search results. This was designated as “Pay-for-Placement” (PFP) search.
After the creation of a network of distribution with search engines, PFP search became very effective. During 2002, the popularity of this model soared with increased spending on these programs by advertisers as well as an onslaught of additional PFP engines and ancillary support tools. As the popularity of PFP advertising increased, the demand for PFP tools increased.
Bid Management
Placement and ranking of advertisements in search results is determined by user bids on keywords. Bid Management is defined as the process by which bids for specific ranking positions at PFP search engines are automatically or manually managed with software. PFP search engines include 7Search (7search.com), AhHa (ah-ha.com), BrainFox (brainfox.com), ePilot (epilot.com), eSpotting (UK, DE, FR, IT, SP) (espotting.com), FindWhat (findwhat.com), GoClick (goclick.com), Google Adwords Select (google.com/ads), Kalloodle (kanoodle.com), Overture (US, UK, DE, FR) (overture.com), Search 123 (search123.com), Sprinks (sprinks com), Turbo10 (turbo10.com), and Xuppa (xuppa.com).
First-Party Bid Management
First-party Bid Management (BM) is provided directly by each independent PFPsearch engine. A basic user interface is provided for the following functionality: 1) Account Management (initial set-up, billing, contact), 2) Keyword Management (enter keyword, description, URL landing page), 3) Bidding Rule Management (see below), and 4) Basic Reporting (position, bid amount, click-throughs, account balance).
All of the above listed features are considered straightforward and standard BM features. The complex and special features relate to “Bidding Rules.” Most, if not all, PFP search engines allow users to set some basic bidding rules such as specifying the maximum price-per-click and monitoring funds to cap all bids at a maximum amount. These rules tend to be fixed, subject to human monitoring and adjustment, but with some automated capabilities.
For example, one rule could be: for the phrase XYZ, set bid at $1.50, but cap clicks at $2,000. This rule basically says that for the phrase XYZ, I want to bid $1.50 per click (which could result in the number one ranking so long as no one out bids me) and when I've spent $2,000, remove my phrase (e.g. by setting the bid to $0).
Drawbacks to First-Party Bid Management
The major drawbacks of using the BM features at a particular PFP engine are:                1) No economies of scale. Including keywords in several PFP engines means setting up, managing, and maintaining an account at each PFP engine.        2) Lack of sophistication in bidding rules. The rules engines are simple and can only base bidding on criteria the PFP engine has control over, such as position, Cost-per-click (CPC), or click-throughs.        3) Separate reporting. Analyzing aggregate performance across PFP engines, requires extracting the relevant data and building a separate reporting mechanism.        4) No connection to site-side results. The PFP engines track click-throughs and page impressions for keywords and phrases, but do not track sales as a result of the placed advertisements. In other words, the PFP engine tracks activity on its portal, but not activity on a user's website.        
Third-Party Bid Management Tools
Third-party bid management tools include BidRank (bidrank.com), Bids Monitor (bidsmonitor.com), Dynamic Keyword Bid Maximizer (submission2000.com/overturebidmaximizer.html), Epic Sky (epicsky.com), Good Keywords Pro, (ppctoolkit.com/products/gkwpro), Go Toast (gotoast.com), PPC Pro (ppcmanagement.com/ppc_pro.htm), and Sure Hits (sure-hits.com).
Third party BM technologies enhance the bid management process by enabling users to increase the sophistication of their bids by automating the rules, enabling users to intelligently bid, and automatically updating the bids at PFP engines. They also serve to aggregate multiple PFP engines through a single interface, making it easier for users to manage keywords across several PFP engines.
Features of third-party BM tools include 1) Account Management (set-up, billing, contact), 2) Centralized Keyword Management (keyword, description, URL), 3) Bidding Rule Configurator (by engine, increased functionality), and 4) Basic Reporting (Traffic by PFP engine, position, cost, account balance).
An example of a third-party bid rule is as follows: Phrase=123, target positions 1-3, between the hours of 4 PM-11 PM, with a maximum bid of $1.50 per click, incremented in $0.05 increments, target positions 4-10, between the hours of 11 AM-3:59 PM, with a maximum bid of $0.75 per bid, incremented in $0.05 increments, and from 11:01 PM-10:59 AM make no bid, check positions 12 times per day, cap bids at $2,000.
The third party bid management tool interprets this example rule to check and update this user's bids every other hour. During specified periods of the day, it will bid more aggressively than other times, allowing the user to maximize the impact of each advertising dollar. The third party bid management tool will automatically increment the bid to keep the keyword in the desired position, yet the cost will not go above the cap limit and the budget allocation.
Typical third party bid rules include:                1) timed rank—change position based on time of day;        2) first gap—moves a keyword to first gap;        3) largest gap—moves a keyword to largest gap;        4) time zone—moves listing to desired position by time zone;        5) delayed start—executes bidding after specified time;        6) price differential—moves position only if the price differential is greater than ‘x’;        7) relative listing—moves listing to a position above/below specified URL;        8) maximum bid gap—moves bid to 1 cent below competitor's listing;        9) last place—moves a listing to last place;        10) timed bid—changes a bid based on time of day;        11) budget manager—lowers keyword position based on pre-set daily budget.        
Drawbacks of Third Party Bid Management
While third party BM tools allow advertisers to aggregate content and feed multiple PFP engines, few offer much in the way of increased sophistication of bidding rules, or performance-based bidding, and none are integrated with other traffic generation and tracking solutions. These third party BM tools focus on the portal-side optimization and not on the site-side. That is, optimization with third party BM tools only operates at the keyword level. Thus, even though an advertiser can compare performance across multiple PFP engines, the advertiser is only comparing the performance of keywords. The advertiser cannot compare performance against other online marketing programs without extracting data and manually integrating the results. The keyword focused optimization is a high-cost, high-risk model of BM. It is desirable to tie actual revenue, site assessment, and keyword research with paid placement of advertisements in search engines.
None of the prior art BM tools provides a site-side integrated, performance-based BM tool. What is needed therefore, is a performance-based BM tool that overcomes the above-mentioned limitations and that includes the features enumerated above.